The Balance Sheet 177
maturity and an appropriate existing contractual
rate, and interest should accrue until actual pay-
ment is made.- Nontraded debt instruments with uncertain
nominal values: For nontraded debt instruments
(as well as the corresponding fi nancial assets in
the form of debt instruments) where the nomi-
nal value is uncertain, the nominal value can
be calculated by discounting future interest and
principal payments at an appropriate existing
contractual rate of interest.
Value Obtained by Accumulating and Revaluing Transactions
7.31 In the absence of observable market prices,
the balance sheet value of an asset may be obtained by
accumulating and revaluing transactions. Th e values
of most nonfi nancial assets change, refl ecting changes
in market prices. At the same time, initial acquisition
costs are reduced by consumption of fi xed capital^12
(in the case of fi xed assets) or amortization or deple-
tion^13 (in the case of other nonfi nancial assets) over
the expected life of the asset. In principle, the value
of such a nonfi nancial asset at a given point in its life
is given by the current acquisition price of an equiva-
lent new asset minus the accumulated consumption
of fi xed capital, amortization, or depletion. Th is valu-
ation is referred to as the written-down replacement
cost. When reliable, directly observed market prices
for used assets are not available, applying this method
gives a reasonable approximation of what the market
price would be, were the asset off ered for sale. For ex-
ample, the principle could be applied as follows for
these assets:
- In the absence of observed market values, most
fi xed assets are recorded in the balance sheet at
their written-down replacement cost. - Intangible nonproduced assets, such as goodwill
and marketing assets, are typically valued at their
initial acquisition costs minus an allowance for
amortization. For this method, a pattern of de-
cline must be chosen, which may be based on tax
laws and accounting conventions. - It may be possible to value subsoil and other nat-
urally occurring assets at their initial acquisition
(^12) See Box 6.1 for guidance on the calculation of consumption of
fi xed capital.
(^13) See paragraph 10.52.
costs (appropriately revalued using a relevant
specifi c or commodity price index) minus an al-
lowance for depletion.
7.32 Th e perpetual inventory method (PIM) is
commonly used to estimate the written-down replace-
ment cost of a category of assets, especially tangible
fi xed assets. With this method, the value of the stock is
based on estimates of acquisitions and disposals that
have been accumulated (aft er deduction of the accu-
mulated consumption of fi xed capital, amortization,
or depletion) and revalued over a long enough period
to cover the acquisition of all assets in the category.
Th e PIM may be viewed as the macro equivalence
of an asset register: the PIM does these calculations
for large groups of assets, while an asset register does
them for individual assets or asset types.^14
Present Value of Future Returns
7.33 In some cases, current market prices may
be approximated by the present value^15 of the future
economic benefi ts expected from a given asset. Th is
method may be feasible for a number of fi nancial
assets, naturally occurring assets, and intangible as-
sets. For example, timber and subsoil assets are assets
whose benefi ts are normally receivable well in the fu-
ture and/or spread over several years. Current prices
can also be approximated by net present value when
there are costs of bringing assets to the market. Th e
economic benefi t and costs can be discounted to esti-
mate the net present value of the asset.Classifi cation of Assets and Liabilities
Nonfi nancial Assets (61)^16
7.34 At the fi rst level of classifi cation, there are
four categories of nonfi nancial assets. Th e fi rst three
categories are produced assets—fi xed assets (611), in-
ventories (612), and valuables (613)—and the fourth
consists of all nonproduced assets (614). Th e summary(^14) For details on the PIM, see Organisation for Economic and Co-
operation and Development, Measuring Capital—OECD Manual:
Measurement of Capital Stocks, Consumption of Fixed Capital and
Capital Services (Paris, 2009).
(^15) Present value is the value today of a future payment or stream of
payments discounted at some appropriate compounded interest
rate. It is also referred to as the “time value of money” or “dis-
counted cash fl ow.”
(^16) Th e numbers in parentheses aft er each classifi cation category
are the GFS classifi cation codes. Appendix 8 provides all classifi -
cation codes used in GFS.